The Effect of Inflation and Interest Rate on Turkish Banking System's Incomes 1

The study aims to explore 1) to understand how low inflation and interest rates affect to Turkish banking system's income. 2) to find out whether low profit margins of banking, said that contraction in public because of low inflation and low interest rate, compensated by commission income. Data...

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Bibliographic Details
Published in:Journal of economic & management perspectives 2014-12, Vol.8 (4), p.19
Main Authors: Ozen, Ercan, Tetik, Metin
Format: Article
Language:English
Subjects:
Bank management
Banking industry
Capital stock
Equity
Fees & charges
Financial performance
Inflation rates
Interest costs
Interest income
Interest rates
Profit margins
Profitability
Studies
Variables
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Summary:The study aims to explore 1) to understand how low inflation and interest rates affect to Turkish banking system's income. 2) to find out whether low profit margins of banking, said that contraction in public because of low inflation and low interest rate, compensated by commission income. Data set of the study consists 46 quarterly between 2002:1 and 2013:4. The main findings based on SVAR model impulse response analysis, it has been showed that an increase of political interest rate has negative effect on rate of assets (ROA) and hasn't any statistically meaningful effect on rate of equity (ROE). Whereas, it has been showed that inflation doesn't affect to ROA as statistically and affect ROE as statistically. Another finding of the study is that contribution of net interest income to profitability bigger than that of commission. This result means that the interest income is still the major profit element of banks.
ISSN:2523-5338
2523-5338